ok..the market was terrible last week.
There is no getting around it, the Dow was off 500+ points on Friday. And that was on the heels of a terrible Thursday.
As I write this, it sounds as though we may see more of the same next week as Asian markets and that the futures markets are looking even worse for Monday.
So what to do?
Well what do you do when you ride a roller coaster? You only get hurt on a roller coaster when you jump off as it is still moving. Once you are on, there is no point jumping off after the first big dip.
Unless something changes, there is no reason to believe this is anything other than a garden variety market correction. Yes there might be more downside, we might lose another 10% or so, but even at this point there are some stocks that I think are interesting.
I still like Disney, Apple, and KMI among others. I might raise some cash in some other areas with the intent of buying some more of these stocks. Especially if the markets continue to drop.
I think good high quality stocks who have great cash flow, high dividends (or the ability to increase dividends), and who have premium brand names in their market are the place to be. KMI as an example is sitting at a 6.2% dividend and has committed to a 10%/year dividend increases for the next 5 years. Even if they lower that guidance, you are still being paid a huge premium to Treasuries. Plus you will get a stock price appreciation kicker if the dividend is increased.
Apple and Disney have huge cash flows and have a history of highly successful targeted stock buy backs, and both have huge product launches coming up (DIS with Star Wars, AAPL with a new Iphone). They are both way off their highs, and both are best in class assets with ecosystems that can’t be duplicated They will go up over time, and this pull back is giving you a good place to get in, and I like these companies enough I would double down if their stock price drops more.
When oil bottoms (I dont think its quite there yet) I may look at one of Exxon/Hess/Conoco/Chevron, and might double down on an existing position in EOG.
There are a few other positions I might try and increase as well over the next month or two. Cisco, Financials, Defense, maybe some tech.
In our 401K account we have a larger than ideal percent of our portfolio in a money market fund. Over the last month or two, I felt like the market was getting sluggish. Since we have been making extra payments on our 401K loan, we decided it was best to have those extra payments mainly go into a money market and move them into various index funds over time. The whole idea was to spread out the market risk, especially while the market was near a top.
Now that we have had a pullback, its time to get at least some of that money invested, I am thinking of maybe moving 25% of our cash into the market this week, and maybe another 25% for every 10% market drop. We might also consider additional moves at certain milestones. For instance after the fed announces their intentions with rates, or after we get past October.
Basically the idea is to take this time of market panic and move into, not out of the market. Short term the market might drop some more, history tells us that is a good time to buy even more, especially since we are talking a 15-20 year time horizon with retirement funds. I have every confidence we will do well in the markets over any 20 year time horizon.
Its a roller-coaster, don’t jump off in mid ride.